Is Emergent Biosolutions Inc (NYSE:EBS) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Emergent Biosolutions Inc (NYSE:EBS) ready to rally soon? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions improved by 5 lately. Our calculations also showed that EBS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). EBS was in 18 hedge funds' portfolios at the end of September. There were 13 hedge funds in our database with EBS positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to review the recent hedge fund action regarding Emergent Biosolutions Inc (NYSE:EBS).
How are hedge funds trading Emergent Biosolutions Inc (NYSE:EBS)?
At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EBS over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Emergent Biosolutions Inc (NYSE:EBS) was held by Renaissance Technologies, which reported holding $51.5 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $34.6 million position. Other investors bullish on the company included Millennium Management, Royce & Associates, and Marshall Wace. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Emergent Biosolutions Inc (NYSE:EBS), around 0.29% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.14 percent of its 13F equity portfolio to EBS.
As aggregate interest increased, key money managers have jumped into Emergent Biosolutions Inc (NYSE:EBS) headfirst. Millennium Management, managed by Israel Englander, initiated the biggest position in Emergent Biosolutions Inc (NYSE:EBS). Millennium Management had $19.6 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe's Voleon Capital also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Frederick DiSanto's Ancora Advisors, Karim Abbadi and Edward McBride's Centiva Capital, and Michael Gelband's ExodusPoint Capital.
Let's now take a look at hedge fund activity in other stocks similar to Emergent Biosolutions Inc (NYSE:EBS). We will take a look at AMN Healthcare Services Inc (NYSE:AMN), Columbia Banking System Inc (NASDAQ:COLB), Fulton Financial Corporation (NASDAQ:FULT), and Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR). This group of stocks' market caps are closest to EBS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMN,7,65930,-7 COLB,8,100681,1 FULT,15,17782,1 ARWR,15,156469,-1 Average,11.25,85216,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $158 million in EBS's case. Fulton Financial Corporation (NASDAQ:FULT) is the most popular stock in this table. On the other hand AMN Healthcare Services Inc (NYSE:AMN) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Emergent Biosolutions Inc (NYSE:EBS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EBS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EBS were disappointed as the stock returned 4.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.